Starting a Record Label

The Four Things You Need Before Starting a Record Label

So, you want to start a record label, huh? That’s a great idea! More cynical types might disagree but here’s why I think it’s a good idea: the music industry always needs more passionate people to get involved and learn the ways of the business. Of course, just because you’re not necessarily going to be behind the microphone (or maybe you’ll be doing that as well?), it doesn’t mean you’re going to have an easier go of making a living. In fact, creating your own venture while doing anything connected to music can be incredibly tough and unless you’re really willing to give it your everything, don’t sink any real resources into the project to begin with.

But where does one even begin to create a record label? Well, it’s actually as simple as saying you’ve created a company. Believe it or not, once you decide to do it, you’ve kind of already started. Now, that is the absolute bare minimum and nobody who puts in this lowest amount of effort makes it big, so don’t think for a second just because you have a name, a website, social channels and a logo you’re all set.

There are a million things I could tell you about starting a record company and you should do a lot more reading than just this one piece if you’re serious about it, but here are four things you’re going to need (and a few things you’ll need to know) when it comes to starting a record label.

1. A Plan

Lots of people who either start record labels or who have dreams of doing so don’t necessarily realize what these companies do. Instead, they are often music lovers who simply want to help promote great music that isn’t receiving the attention they believe it deserves. While it’s a wonderful and admirable goal, it doesn’t necessarily make for a solid business plan — just ask the thousands of label owners who have seen their companies disintegrate not long after creating them.

Many who get into the music industry aren’t necessarily known as brilliant business people but if you want to survive, you’re going to need to be smart about everything you do. When it comes to running a company, the first thing that’s an absolute must is coming up with a business plan.

Before getting started, there are a few questions you’ll need to ask yourself — and be able to answer truthfully and honestly. Your answers will define how you go about managing your affairs. First, is this record label going to serve just you and your art or is it your intention to sign other musicians and bands? Either answer is fine but it should probably be one or the other. If you simply need some legal protection and benefits for your own musical career, a self-owned record label can be a great way to go. However, it’s perhaps not the best option if you’ll be signed to the same roster as other acts, as you are likely to favor your own creations and give yourself an unfair amount of resources and not necessarily because of the quality or sales potential.

Second, what is the purpose of your company? I mean, what do you really want to get out of this venture? Is it just for fun? Are you looking for a way to break into the music industry and you believe this to be it? Are you seeking fame, fortune, and riches? If the last choice is what is truly in your heart, I can’t blame you, but a record label might not be the easiest route to your dream destination (as if there was such a thing). Be honest with yourself here because it would be a shame to work hard and commit funds to something only to realize later you were doing it for the wrong reasons.

Finally, what will separate your label from the hundreds of thousands of others out there? Will you stick to a certain city or geographic location? Perhaps you want to be known for promoting the best new acts in a certain genre? Or if you think you can make it work, maybe there’s space to succeed working with acts of a certain demographic? Make sure to choose something you can remain passionate about throughout the hard times and the long hours, as there are sure to be plenty of both. Differentiation is key when it comes to ruling with any business, especially in the crowded music landscape.

How much money you need before you begin is up to you. I can’t quote you an exact figure because it will vary widely based on your goals and aspirations. That said, the amount you’re willing to commit should help give you an idea of what you’ll be able to do, at least at the outset.

2. Money

How come everything requires money in this world? Sadly, it’s just the way things work and it seems like most things worth doing need you to put up at least a little capital as you begin. They do say you need to spend money to make money and while you may not be in this for the cash (which is good, because most indie labels aren’t known for being massive moneymakers), any successful business needs to bring in some revenue!

How much money you need before you begin is up to you. I can’t quote you an exact figure because it will vary widely based on your goals and aspirations. That said, the amount you’re willing to commit should help give you an idea of what you’ll be able to do, at least at the outset. Take some time and do the research necessary to find out what everything will cost, from distributing albums (which we’ll discuss below) to recording costs to legal fees and beyond. A few hundred tiny fees will arise along the way when it comes to releasing an album and while a few surprises that run just a couple of dollars isn’t going to make much of a dent, they can add up quickly. You should be prepared for them.

It’s also important to keep in mind you don’t necessarily need to pay for everything and there are very different schemes you can work out with your bands. Sometimes you simply pay them a lump sum and they need to make everything work from that figure, while in other instances, you’ll be sharing the burden, discussing who covers what as costs come up. Both come with upsides and downsides and sometimes it’s simply down to what you can afford at the time. But be ready for every project to burn a hole in your pocket, at least for a little while.

3. Distribution

Back in the day, when record labels truly ruled the world, one of the biggest reasons they were so necessary was because they owned access to distribution channels. It was almost impossible to make a living as a musician without a record label or at least make it big in any way without a contract, as one had to go through those few companies in order to get music into stores, where all transactions took place. Sure, they did other things, but the main point of working with a label was to see your record, and then CD, sold in stores across the country, which would ensure you at least had a chance of making some cash.

This model went out the window shortly after the internet popped up and it’s a distant memory now. In fact, even some of the biggest names in the business release physical editions of their new albums weeks after the digital versions go on sale and hit streaming platforms. Now working in music has become much more democratic since anybody can publish their creations to essentially every site online.

As a record label operating in today’s musical world, you’ll need to be the one partnering with a distributor to upload a new song, video, or album on everything from iTunes and Spotify to smaller, lesser-known options specific to certain genres or countries. You can typically choose just one company, a digital service provider (or DSP, if you want to get the lingo down) that works for you and has a price point you like and just work with the firm over and over again.

This will be a big part of what you do as a record label but it’s important to do much, much more, because no artist needs a label to connect them with these DSPs anymore. In fact, there are many who do it themselves so this can’t even be the greatest thing you bring to the table. Otherwise, many artists you’re interested in signing will likely walk the other way.

An Attorney can help create a contract you’ll sign with your bands to protect everyone involved while an Accountant or tax professional will ensure your taxes are in order and you’re handling your money in the best way possible. These people certainly won’t be on staff and you should only retain them for short stints of time, so be smart with the questions you ask and the services you need them to provide.

4. Legal And Financial Help

When you first launch your new venture, you probably won’t need a lot of legal advice and assistance so this may not wind up being a major cost. You should still be prepared to spend at least a few hundred dollars on a Lawyer and someone who really understands numbers in order to do this right. Otherwise, you will eventually wish you had done so.

One of the biggest benefits of owning a company, whether it’s simply to release your own music properly or to work with other names, are all the benefits that come with being a legally-registered business. An Entertainment Attorney can also assist when it comes to choosing what form of company (an LLC, a partnership, a sole proprietorship, etc.), — which is yet another thing to think about — will serve you best. Some of these are easy to find and take advantage of while others will require a professional to explain. An Attorney can help create a contract you’ll sign with your bands to protect everyone involved while an Accountant or tax professional will ensure your taxes are in order and you’re handling your money in the best way possible. These people certainly won’t be on staff and you should only retain them for short stints of time, so be smart with the questions you ask and the services you need them to provide.

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